Investing On a Shoestring

By Barbara O’Neill, Ph.D., CFP®, Rutgers Cooperative Extension, oneill@aesop.rutgers.edu  

Many people mistakenly think that they need to have at least several thousand dollars to invest. This is simply not true. It is possible to invest on a shoestring, with small dollar amounts ($1,000 or less).

Hand inserting money into piggy bank

Even people with modest incomes can build wealth over time, and they don’t need a lot of money to get started.  For example, they could open an investment account with money from accumulated savings or an income tax refund and then make smaller regular deposits (e.g., $50 or $100 per month).

Some investments can even be purchased in increments of $100 or less (e.g., $10 per paycheck invested in an employer retirement savings plan).  Setting aside small amounts of money regularly and reducing household expenses to “find” money to invest are the keys to successful shoestring investing.

Below are six action steps to invest with small dollar amounts for service members:

  1. Make Tax-Deferred Deposits at Work- The Thrift Savings Plan (TSP) is the tax-deferred retirement savings plan for service members and federal government employees. Contributions are made as a percentage of basic pay via automatic payroll deductions. Other advantages are a federal income tax write-off for the plan contribution amount and tax-deferred growth of plan deposits and investment earnings.
  2. Buy Stocks on a Shoestring– Back in the day, stock investors often needed five-figure sums and a broker to buy 100 shares of several stocks to set up a diversified portfolio. This is no longer the case. Low-cost stock purchase options include investment clubs, dividend reinvestment plans (DRIPs), direct purchase plans or DPPs (where investors buy stock directly from a company), and various online investing platforms.
  3. Buy Bonds on Shoestring- All U.S. Treasury securities (i.e., bills, notes, and bonds) have $100 minimum deposits and $100 purchase increments. Specific details can be found on the Treasury Direct Other low-deposit, fixed-income investments include corporate bonds, zero-coupon bonds, and U.S. savings bonds. Series I bonds provide inflation protection, and series EE bonds pay interest based on current market rates.
  4. Buy Mutual Funds on a Shoestring– Initial minimum deposit amounts and minimums for subsequent deposits vary among mutual funds. If a mutual fund requires more than $1,000 to establish an account, it may still have lower minimums for IRAs and other retirement plans, minor’s accounts, and automatic investment plans where investors make regular deposits on a regular schedule (e.g., $100 per month).
  5. Collect Loose Change– Coins saved in some type of container add up over time and can provide “seed money” with which to make investment deposits. Better still, save $1 a day, plus coins (about $50 a month or $600 per year) or $2 a day, plus coins (about $80 a month or almost $1,000 per year). Ideally, use a clear jar or other type of container to see the investing seed money grow. Visibility provides motivation.
  6. Continue “Paying” an Expense- This strategy is powerful because it does not affect peoples’ cash flow or make them feel deprived. Simply continue making monthly “payments” as regular deposits to an investment plan after a loan or household expense ends. In other words, redirect the money from an expense to an investment. Examples include car loan payments, student loan payments, a mortgage, and child care.

For additional information about investing on a shoestring budget, review the archived Military Families Learning Network webinar, Investing with Small Dollar Amounts and its accompanying handouts, including presentation slides, an online resource list, and an investment risk tolerance quiz. Another free resource for beginning investors with small dollar amounts is Unit 8 (Investing Small Dollar Amounts) of the free online Cooperative Extension basic investing course, Investing For Your Future.

Total Force Fitness and Military Families Learning Network: Network Literacy

Friday Field Notes banner image: Featuring engaging stories from practitioners about how partnerships with Cooperative Extension help build Community Capacity to support military service men and women and their families.

In this week’s Friday Field Notes, we will continue our exploration of the resources and programming that Military Families Learning Network provides to support Total Force Fitness with our Network Literacy team.

Network Literacy and Total Force Fitness

Network Literacy’s work directly supports social and psychological fitness in their efforts to increase resilience through relationships and networks. Through their programming, Network Literacy helps individuals build the skills they need to grow and maintain their own supportive network. Supportive networks are a key piece of the puzzle when it comes to maintaining social and psychological fitness.

The Resilience Series, a collaboration between Network Literacy, Family Development, and Family Transitions, is a three-part series that examines factors promoting individual, family, and community resilience. The series begins next week, on Tuesday, August 20th, at 11am Eastern Time, with Nurturing Individual Resilience from a Multi-System Developmental Perspective.

As a part of the Building Networks for Resilience learning experience, Network Literacy produced a five-part Working Out Loud for Resilience podcast. In addition to providing more information on Working Out Loud and ways to improve one’s own resilience, in each podcast, listeners are given specific strategies they can incorporate into their daily lives to improve their networks and build resilience.

Finally, keep an eye out this fall for an exciting new podcast series produced by Network Literacy. The podcast will focus on themes that tie together the work of military family service providers across disciplines. It will be a catalyst for conversations that connect us, help us collaborate, and lead to greater impacts for the people we serve.

Additional Resources from Network Literacy

Network Literacy provides programming aimed at increasing relationship building, personal growth, and shared work to help individuals build resilience. Network Literacy provides webinars, podcasts, and timely blog posts as a part of their programming. And make sure to keep up with Network Literacy on twitter!